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WaMu gets $7bn injection from TPG-led investor group

Washington Mutual, the largest US savings and loan company, has agreed a $7bn (â‚¬4.4bn) injection from investors led by private equity group TPG, and warned of a $1.1bn first-quarter loss.

In the fundraising, WaMu sold 176 million shares at $8.75 each, for gross proceeds of $1.5bn. It also sold $5.5bn of convertible preferred shares.

To shore up its capital position, WaMu will slash its quarterly dividend to 1 cent a share from 15 cents, saving $490m. It is the second dividend cut in four months. The group has set aside $3.5bn to cover loan losses, nearly twice as much as anticipated, and said net charge-offs will total $1.4bn.

David Bonderman, a founding partner of TPG and a director of WaMu from 1996 to 2002, will rejoin WaMu's board. Larry Kellner, the chief executive of Continental Airlines, will become a board observer, at TPG's request.

WaMu increased the size of its fundraising - from an initial $5bn to $7bn - due to greater than expected demand. TPG will buy $2bn of the shares, with the others taken up by the bankâ€™s existing leading shareholders.

JPMorgan, which has emerged as the go-to bank for the financial industry, got spurned by Washington Mutual just weeks after receiving an urgent call for help from the struggling competitor, it has emerged.

Sources said WaMu had been working on the TPG deal while negotiating with JPMorgan, which made a preliminary takeover bid of as much as $8 a share in JPMorgan stock, or about $7bn.